Differences Between 1P and 3P Sellers on Amazon

Amazon has two business models for selling products on Amazon. They are 1P (first-party selling) and 3P (third-party selling). First-party selling is done by vendors, and third-party selling is done by retail sellers. The most important decision to be taken when one is willing to sell products on Amazon is to choose the right mode, which is either Vendor Central (1P) or Seller Central (3P). It is very important to understand the differences between these two models because the level of control, prices, and profits differ greatly between 1P and 3P selling on Amazon. 

If you wish to understand the Amazon 1P definition and the definitions of 1P and 3P in e-commerce and sales, the answer is very simple. In Vendor Central, you sell your products to Amazon, and in Seller Central, you sell your products to customers. Therefore, understanding the differences between Amazon 1P vs 3P is crucial for both new and experienced sellers. 

In the following article, a detailed comparison of 1P and 3P on Amazon will be provided to help you decide which choice is best for you.

What is Amazon 1P Sellers?

In the 1P model, Amazon acts as a retailer and wholesales the seller’s inventory to its warehouse. This means Amazon owns the inventory, and they will handle the listings through Vendor Central. They set prices for the products to be sold on the marketplace. 

This is an invite-only feature from Amazon. Based on the seller’s performance on Amazon, Amazon invites retailers or 3P sellers to join the Vendor Central or 1P  program. Once you have been invited and joined the program, Amazon will make a purchase order. You need to fulfill that purchase order and forward the inventory to the Amazon warehouse. 

All the listings created under the 1P program are labelled as “Ships and sold by Amazon”.

Pros:

• Large orders for purchases from Amazon.
• The Amazon team handles the listing optimization.
• More advertising opportunities.
• There is a flat fee concept in Vendor Central, no referral or fulfillment fee.
• “Ships and sold by Amazon” badge on the listing for trust-gaining among customers.

Cons:

• Low margins as you wholesale the inventory to Amazon.
• Limited control over the listings. Amazon sets the prices accordingly.
• In case you fail to meet the stock fulfillment requirements, you may face chargebacks.

3P Sellers

Third-party sellers are a simple business model used by millions of Amazon sellers. Here, you act as a retailer, and Amazon works as a marketplace—nothing else. You will create your product listing in the seller central dashboard and sell it on Amazon. 

You have two modes to choose from when selling on Amazon: FBA and FBM.  Each mode has pros and cons. In FBM, you need to fulfil the order through carriers and handle customer support. In FBA, you transfer the inventory to an Amazon warehouse. They will handle the shipment for you and provide customer support.

Pros:

• You have control of your products and can regulate pricing and other things accordingly.
• You can decide whether to do FBM or FBA.
• You can control the inventory volume and promotions.
• Instead of doing wholesale, you can generate a good retail margin on every sale.

Cons:

• You need to pay multiple fees, such as referral and fulfilment fees.
• If you are doing FBA, you need to pay storage fees. If your unit does not exhaust within a year, you must pay additional fees to keep inventory in their warehouse.

1P Vs 3P Business Model on Amazon: What is best?

In e-commerce, 1P (Vendor Central) and 3P (Seller Central) are the primary sales models. When comparing Amazon 1P vs 3P, the differences primarily revolve around control, pricing, and fulfillment. This comparison plays a crucial role in making decisions regarding Amazon 1P vs 3P. Choosing between 1P vs 3P depends on your business goals and resources:

Conclusion

The 1P and 3P selling models on Amazon have different benefits and drawbacks. Vendor Central, known as 1P selling, sells products in bulk to Amazon, generating large-scale purchase orders. Amazon then manages advertising and listing optimization. But there is less control over the listings and less profit. With 3P selling, also known as Seller Central, more control over inventory, pricing, and products is possible. Although they charge a referral and fulfillment fee, sellers can choose either Amazon FBA or FBM fulfillment methods. The seller’s preferences and business plan will determine whether to use 1P or 3P.

Are you a new seller on Amazon? Get in touch with us today to benefit from full Amazon account management and content creation.